Sun Microsystems CEO and president Jonathan Schwartz gestures during a news conference in San Francisco, Monday, Jan. 22, 2007. Sun Microsystems Inc. is expected to post fiscal second-quarter earnings after the bell. Analysts expect the struggling hardware and software veteran to earn $26.42 million, or 1 cent per share, on sales of $3.52 billion. (AP Photo/Paul Sakuma)
Ran on: 01-24-2007
Sun CEO Jonathan Schwartz is pleased with the improvement. less

Sun Microsystems CEO and president Jonathan Schwartz gestures during a news conference in San Francisco, Monday, Jan. 22, 2007. Sun Microsystems Inc. is expected to post fiscal second-quarter earnings after the ... more

Photo: PAUL SAKUMA

Image 3 of 3

Emerging markets in BRIC nations are focus of technology firms

1 / 3

Back to Gallery

Forget everything you know about today's computer industry.

Future technology growth will be driven by emerging markets rather than Europe, North America or Japan, and consumers in these emerging markets will probably use handheld devices rather than the desktops or laptops that have been our gateways to cyberspace.

That's a view gaining credence in Silicon Valley, where giant tech companies like Sun Microsystems, Cisco Systems, Hewlett-Packard and Intel are in a constant struggle to find new markets to fuel the wild growth expectations on Wall Street.

Look no further than Sun Microsystems' Chief Executive Officer Jonathan Schwartz, who preached this view to a small gathering at the company's Menlo Park headquarters Wednesday.

These Linking Tents Are Your New Favorite Camping GearPopularMechanics

Emily Chang, author of 'Brotopia'Fox5

Presidents Day: The Top Sales from Amazon, Macy's and MoreWibbitz

Coinbase Introduces the ‘PayPal of Crpyto’Fortune

"If you believe our business is following consumers, you have to be concerned about where the consumers are," said Schwartz, who thinks the future market for high-tech sales is spelled BRIC, short for Brazil, Russia, India and China, or BRICA when Africa is thrown in.

The gathering Sun organized this week illustrates how U.S. technology firms are being forced to make every aspect of their operations, from manufacturing to sales to hiring, into a global operation, with a particular emphasis on the fast-growing but still comparatively poor developing world.

Gartner market research director Sandy Shen recently noted that with 85 percent of the world's population living in emerging markets, their purchasing power is on an inexorable rise.

Microsoft, Intel, Hewlett-Packard, IBM and every other technology company of any size or ambition have refocused on these emerging markets, especially the BRIC nations which in many ways - from an economic, social and even military point of view - are the up-and-comers of the 21st century.

Sharing Sun's vision of how to address this vast but poor market, Schwartz outlined an updated version of that time-honored strategy of giving away the razors to sell the blades. In this case, Sun hopes to push government agencies and private firms in these regions toward the Internet, on the premise that Sun would end up selling them the hardware and software they need to sustain their networks.

Schwartz said that unlike affluent markets, where technology purchases are based on demand for music, games, social networking and other digital distractions, the developing world's coming wave of electronic purchases will have to be business-based and provide a direct competitive advantage.

For instance, he said, farmers in the developing world could use the Internet to check commodity prices before selling their produce to get the best prices for their wares. And unlike Americans, who have been accessing such comparative information for years via desktop or laptop PCs, the tech user in the BRIC nations would be more likely to use an Internet-enabled cell phone or other handheld device, because they wouldn't be able to afford the PC or even pay for electricity to power bulkier electronics.

"The most pervasive technology deployed around the world today is a mobile handset," Schwartz said, arguing that the emerging market is already upon us.

Companies like Nokia, the Finnish cell phone company, have long been expanding into countries like India and China, where regions are plugging into the world wirelessly because they haven't had the time or cash to run cables.

Schwartz said that as developing nations expand their networks into poor but populous locales, Sun will ultimately benefit as a vendor of server computers, data storage devices and other software and services needed to lubricate these electronic interchanges, but "not in the next quarter or the next few weeks."

How long it will take to develop meaningful revenue from the BRIC countries, and whether Sun will benefit more than other Bay Area heavyweights like HP or Cisco, remains to be seen. But Sebastian Teunissen, director of the Clausen Center for International Business and Policy at UC Berkeley, said at least Schwartz is on the right track in thinking that his firm has to fine-tune its products for emerging market requirements.

"Technology companies used to believe that one size fits all," said Teunissen, who was invited to the Sun event. U.S. tech firms have been spoiled, he said, because their domestic markets are so huge that - other than publishing manuals in the local language - they haven't had to significantly retool their products for overseas sensibilities.

Teunissen, who is more of an expert on trade than technology, said U.S. consumer products companies like Procter & Gamble have long done research into consumer habits overseas. For instance, he said, P&G has studied habits in Japan, where the ritual of hair-washing has more steps than in the United States.

But the Berkeley expert said U.S. tech companies are starting to understand that they have to adjust both their products and their business styles to the realities of doing business in large and ambitious nations that are just starting to come into their own.

For instance, Teunissen noted that after years of haranguing Chinese authorities over illegal copying of its software, Microsoft traded the stick for the carrot by expanding its presence in China. Today it is starting to reap the rewards in the form of agreements with Lenovo Group, the computer-making company in Beijing, to make sure that all its PCs are sold with licensed operating systems.